Opportunity Areas

Impact Economy

Definition

Organizations and private entrepreneurs in the ecosystem of private companies, non-profits, and foundations whose missions involve addressing social challenges and other issues pertaining to the public good.

Overview

The Impact Economy comprises organizations and private entrepreneurs in the ecosystem of private companies, non-profits, and foundations whose missions involve addressing social challenges, including, for example, public health, neighborhood empowerment, and education. The scope of their work can range from a global to hyper-local. Types of organizations that make up this sector include:

Social enterprises: for-profit organizations with a double bottom line – a stated mission focused on creating improvements in human well-being, in addition to being commercially viable

Philanthropy: foundations, limited liability companies, or individuals focused on funding other mission-driven organizations, philanthropy often functions as the venture capitalists and angel investors of the impact economy

Advocacy: organizations or associations including media/communications companies, working to change attitudes, policies or practices on social issues, ranging from broadly ideological to issue-specific

Social impact consulting: non-profit and for-profit consulting firms focused on using a values-based approaches to solve issue-based problems for clients

Impact investors: firms and individuals that invest in companies, organizations, and funds with the intention of generating social or environmental benefits in addition to a financial return

The impact economy is one of the fastest growing sectors of the US economy, accounting for 10% of all jobs nationwide.1 Impact economy organizations, including grantmaking, social advocacy, civic, social, professional, labor, and religious organizations, account for 56,000 jobs in the District. This number likely undercounts the size of the impact economy, as it does not account for social enterprise entities and other for-profits in the space. For example, 69% of startups in region identify as “double bottom line business” (i.e. they measure success by metrics beyond financial that correspond to a social mission), and 41% say they operate in the impact space.2 Additionally, this sector has strong millennial representation. When looking at nonprofits, the backbone of the impact economy, millennials made up 51% of those employed by the sector in DC in 2015 (as compared to 38% in 2014).3

DC’s Comparative Advantage

Based on our analysis and stakeholder interviews, DC has the following comparative advantages:

Vibrant impact economy ecosystem including presence of major funders

The presence of Congress, the Executive Branch, and the headquarters of major American non-profits such as the American Red Cross in DC and the DC metro area make the District a center for policy and thought leadership on issues related to social and policy impact, and thus an ideal location for mission-based advocacy, social enterprise, and other impact economy organizations. In a joint Halcyon-Capital One study, DC was ranked the number one city in the U.S. for social entrepreneurship, based on the health of the components of its social enterprise ecosystem: funding, quality of life, human capital and regulatory environment/receptivity to social enterprise.4 In addition, as the base of US federal government agencies (which fund a significant amount of the sector’s work), and multilateral donor organizations such as the World Bank and the Inter-American Development Bank, DC is an attractive location for impact economy firms and organizations that want proximity to major funders of impact work.

Workforce with experience in mission-oriented work

DC attracts a socially-conscious workforce that has expertise working with public policy, from former government employees to policy thought leaders and new entrants to the workforce from the local universities.

Activating this Opportunity Area

Based on our analysis of this sector and stakeholder interviews, the following actions could help develop this opportunity area:

Uniting the Impact Economy

DC’s impact economy is fragmented due to the number and diversity of organization type, size, and issue area located in the region – many identify with a particular industry, but not under a shared umbrella identity. Many local stakeholders in this space expressed a desire for a stronger network of such organizations and related resources. Coalition building would help add coherence and density to the impact economy, resulting in increased sharing of resources, knowledge, and talent across organizations, and increased access to financing. Mapping DC’s impact economy would help in understanding opportunities for collaboration and support. Additionally, making the supports available to social enterprises easier to find and navigate could help draw prospective entrepreneurs out of the woodwork.

Building Investor Understanding

Based on what we heard from stakeholders in the impact economy, private sector funders generally do not have a strong understanding of what to expect when investing in social enterprises. The higher perception of risk has resulted in limited private sector investment nationwide in these types of ventures. There are thus opportunities to better educate funders about social enterprises and connect them with social entrepreneurs in ways that build trust. The mapping described above could help meet this objective by providing a tool that enables them to become familiar with the local landscape of social enterprises. Furthermore, the District government could help credential or certify social entrepreneurs to assist private funders in recognizing legitimate investments.

Challenge-Based Procurement

While the DC government procures solutions for public and social sector problems, many in the impact economy have cited DC’s procurement process as challenging to navigate. Following the example of the federal government’s Challenge.gov or Philadelphia’s FastFwd programs, DC could reform current procurement practices or implement challenge-based (also known as problem-based) procurement, which involves defining a challenge and soliciting creative solutions from the private sector.

Creating Spaces for Impact Economy Organizations

One theme raised by stakeholders across sectors was the need for more affordable commercial space. DC’s impact economy organizations, particularly newer social enterprises, face challenges when identifying spaces to locate their organizations in the District. By building on the success of established working spaces and incubators such as ImpactHub DC, Cove, Halcyon House, and WeWork, including their existing programs targeted at impact economy organizations, DC could help create density for impact economy organizations, in order to facilitate knowledge sharing.